August 15, 2013 | By Keith Martin in Washington, DC

Rescissions will not be addressed any time soon, the IRS said.

The agency had been considering whether to revise its existing policy on when two companies can unwind a transaction and be treated as if the transaction never occurred. It said Revenue Ruling 80-58 will remain the IRS’s guidance on the issue for the foreseeable future. Bill Alexander, the IRS associate chief counsel for corporations, made the comment at a New York Bar Association tax section meeting in late June.

Revenue Ruling 80-58 said that a sale of real estate in 1978 could be rescinded in the same year, and the buyer given all his money back when he could not get the land rezoned as he wanted, and the parties would be treated for tax purposes as if the sale never occurred. However, if the buyer waited until 1979 to rescind, then there was a completed sale in 1978 and returning the property in 1979 was a sale back to the original seller. The sales contract gave the buyer a right to rescind if he was unable to get the property rezoned. A rescission should put the parties back in the same position economically as if the transaction never occurred.

The IRS will not issue any private letter rulings on rescissions.

There is a risk when a buyer has a right to unwind a transaction that the buyer may not be considered the owner until the unwind right lapses. This is a potential issue in deals where it is important for the buyer to be a partner or owner before assets are placed in service to claim tax credits.